New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing Binance USD stablecoin (BUSD), one of the world’s largest stablecoin by market cap.
The United States Securities and Exchange Commission (SEC), which notifies firms of impending enforcement action, sent Paxos a wells warning not long before the New York regulator took its own enforcement action. According to the notification, Binance USD is an unregistered security.
According to rumors, the NYDFS has requested Paxos to halt producing new BUSD tokens. The product’s redemptions will still be managed by Paxos, according to a statement from Binance.
Following increased examination of the cryptocurrency sector, the third-largest stablecoin has become the subject of the most recent regulatory action.
Only last week did the SEC rule that cryptocurrency staking services are in violation of securities law, causing Kraken to completely discontinue its staking business. In the dispute, Coinbase asserts that its staking products are not securities.
Since the SEC sued Ripple, the company that issued the XRP coin, the long-running discussion over securities in the cryptocurrency market has gained attention.
The case has not yet been resolved. In general, a financial investment into a firm with the assumption that a profit would be earned by someone other than the investor is regarded as a security.
However, given that stablecoins are a well-liked entry point for consumers entering the cryptocurrency space for the first time, the security claims against a stablecoin might pose a significant threat to the sector.
By issuing stablecoins and investing user cash deposits in short-term U.S. Treasury bonds, stablecoin issuers like Paxos have discovered a reliable source of revenue. It has made it possible for businesses to generate higher returns when the US Federal Reserve increased interest rates.
Following the decision by the New York Department of Financial Services the price of Binance Coin (BNB) dropped by 7%. The price of BNB is now below $300; it is presently trading at $290.
